Shareholders approve Lippo Bank's rights issue plan

JAKARTA (JP): Publicly listed Lippo Bank obtained shareholders approval on Wednesday for a rights issue that will allow it to raise Rp 4.7 trillion to finance its recapitalization program.

The bank said in a statement that some 17.1 billion new shares with a par value of Rp 10 would be issued at Rp 275 each.

The government has required all of the country's commercial banks to have a minimum 4 percent capital adequacy ratio (CAR) by the end of this year.

Banks with a CAR level of between minus 25 percent and 4 percent are eligible to join the government bank recapitalization program in which the government will provide up to 80 percent of the recapitalization funding, while the bank must provide the remaining 20 percent.

The CAR is the ratio between capital and risk-weighted assets.

Lippo did not say what its CAR level was.

"We see long term bright prospects for the Indonesian banking industry," said president Eddy Sindoro, adding that the banking sector was one of the key elements in the recovery of the crisis- hit economy.

The bank said that its significantly increased capital would strengthen its liquidity position and boost its net interest margin and profitability.

Lippo Bank, which was established in 1948, claims to have more than 2.4 million customers and 400 branch offices throughout the country.

The bank said that the issuance of the new shares with a par value of Rp 10 each, the first in the history of the country's capital market, was meant to provide greater flexibility for the bank in issuing new shares in the future without having first to increase its capital base.

It pointed out that with a capital base of Rp 1.27 trillion, the bank could issue some 127.15 billion new shares with a par value of Rp 10, compared to a maximum of only 2.54 billion new shares if using a par value of Rp 500.

"Such a flexibility is required in coping with economic and market conditions which change rapidly," a representative from Lippo Bank said. (rei)